U.S. Supreme Court
Young v. Clarendon Township, 132 U.S. 340 (1889)
Young v. Clarendon Township
Argued October 23, 1889
Decided December 9, 1889
132 U.S. 340
It is settled law that a municipality has no power to issue its bonds in aid of a railroad, except by legislative permission.
The legislature, in granting permission to a municipality to issue its bonds in aid of a railroad, may impose such conditions as it may choose.
Where authority is granted to a municipality to aid a railroad and incur a debt in extending such aid, that power does not carry with it authority to execute negotiable bonds except subject to the restrictions and directions of the Enabling Act. chanroblesvirtualawlibrary
The act of the Legislature of Michigan of March 22, 1869, "to enable any township, city or village to pledge its aid by loan or donation to any railroad company, etc.," provided that the bonds when "issued" should be "delivered by the person . . . having charge of the same to the treasurer of this state;" that the treasurer should "hold the same as a trustee for the municipality issuing the same and for the railroad company for which they were issued;" that whenever the railroad company should
"present to said treasurer a certificate from the governor of this state that such railroad company has in all respects complied with the provisions of this act . . . , such of said bonds as said company shall be entitled to receive shall be delivered to said company;"
that the treasurer should endorse upon each bond delivered the date of its delivery and to whom it was delivered, and that in case the bonds were not demanded in compliance with the terms of the act within three years from the date of delivery to the treasurer, "the same shall be cancelled by said treasurer and returned to the proper officers of the township or city issuing the same." The township of Clarendon, in Michigan, having complied with the requirements of the act on its part, delivered to the state treasurer its bonds to the amount of $10,000, dated July, 1869, for the benefit of the Michigan Air Line Railroad Company. The company completed its railroad before February, 1871, and became entitled to the governor's certificate under the act, but on May 26, 1870, the supreme court of the state had declared the act to be unconstitutional, and the governor in consequence thereof refused to give the certificate. On the 28th May, 1872, before the expiration of three years from their delivery, the treasurer returned the bonds to the township. November 12, 1884, the appellant obtained judgment against the railroad company and an execution was issued, which was returned nulla bona. On the 24th February, 1880, he filed a bill in equity against the township and the company, claiming that the township was equitably indebted to the company to the amount of the bonds and coupons with interest, and that he was entitled to recover the amount of that indebtedness, and to apply it on his judgment debt.
(1) That the municipal authorities had no power to deliver the bonds, after their execution except to the state treasurer, and that the word "deliver," as used in the statute with reference to this act, was used in its ordinary and popular sense, and not in its technical sense.
(2) That to the governor alone was given the power to determine whether the bonds should ever in fact issue, and if issued, when they should issue.
(3) That the endorsement by the treasurer upon each bond of the date of its delivery and of the person to whom it was delivered was necessary to make it a completed bond, and that this could not be done until the governor's authorization was made.
(4) That as the bonds were never endorsed and delivered by the treasurer, they never became operative.
(6) That the rule in regard to escrows could be applied to these chanroblesvirtualawlibrary
instruments, because they were never executed in compliance with the peremptory requirements of the statute.
(6) That if the railroad company had any cause of action against the township by reason of these facts, it was barred at law by the statute of limitations of the Michigan.
(7) That by reason of laches in pursuing the remedy, the bar at law could be set up and maintained in equity.
The constitutionality of the Act of the Legislature of Michigan of March 22, 1869, which is considered in this case, was fully settled in the case of Taylor v. Ypsilanti, 105 U. S. 60, to which the Court adheres.
On the 21st of February, 1885, the appellant exhibited, in the Circuit Court of the United States for the Eastern District of Michigan, his bill, in the nature of a creditor's bill, against the appellees.
The bill averred that on the 12th of November, 1884, the appellant obtained a judgment against the railroad company for the sum of $355,865.21; that an execution upon the judgment was issued, and was returned "nulla bona;" that the judgment was still unpaid, and that the railroad company was a corporation, organized on the 28th of August, 1868, by a consolidation of two companies -- one organized under the laws of Michigan and the other under those of Indiana, which consolidated company was itself, on October 8, 1880, again consolidated with the St. Joseph Valley Railroad Company, retaining, however, its name of the Michigan Air Line Railroad Company.
The bill also alleged that after the first consolidation as aforesaid, and on the 22d of March, 1869, the Legislature of Michigan passed
"An act to enable any township, city, or village to pledge its aid, by loan or donation, to any railroad company now chartered or organized or that may hereafter be organized under and by virtue of the laws of the Michigan in the construction of its road."
Said act authorized the issue of aid bonds. In its fifth and sixth sections it provided as follows:
"SEC. 5. Whenever any such bonds as provided by provisions of this act shall have been issued as therein specified, the same shall be delivered by the person, persons or officers having charge of the same to the treasurer of this state, who
shall give a receipt therefor and hold the same as trustee for the municipality issuing the same and for the railroad company for which they were issued, and to be disposed of by said treasurer in discharge of his trust, as hereinafter provided."
"SEC. 6. . . . Such bonds shall be safely kept by such treasurer for the benefit of the parties interested, and be disposed of by him in the following manner -- that is to say, whenever any railroad company in aid of which any of such bonds may have issued shall present to said treasurer a certificate from the governor of this state that such railroad company has in all respects complied with the provisions of this act and is thereby entitled to any of such bonds, the same or such of said bonds as said company shall be entitled to receive shall be delivered to said company, the treasurer first cutting theref